Domino's Pizza UK Franchisee Adds Stake In Iceland Operation

Domino's Pizza, Inc.’s (NYSE:DPZ) master franchisee Domino’s Pizza is reportedly purchasing an additional 44.3% stake in Domino’s Iceland for $35.71 million (30.2 million euros), taking its total stake there to 95.3%.

The company has also approved a further 20-million pound share buyback. It stated that it will continue to buy back shares as part of its strategy to return surplus capital to shareholders.

We observe that the company’s stock has rallied 14.6% year to date, underperforming the industry’s gain of 14.8%.

Strengthening Franchising Strategy

The move appears to be part of Domino's bid to strengthen its franchising strategy. The strategy helps it to reduce its ownership of restaurants, thus minimizing capital requirements and facilitating earnings per share growth and ROE expansion. A growing free cash flow allows management to make investments in areas that exhibit true potential.

Domino's Pizza Inc Net Income (TTM)

Domino's Pizza Inc Net Income (TTM) | Domino's Pizza Inc Quote

Boosting International Expansion

The move will also help the company further strengthen its foothold outside the United States. Many of the international franchisees continue to generate robust returns. The company’s international growth continues to be strong and diversified across markets, driven by exceptional unit level economics.

Notably, apart from established markets such as Canada, Japan, the U.K., Ireland, Switzerland and South Korea, emerging markets like Brazil, China, Indonesia and Turkey have been posting strong growth. Australia, Russia, New Zealand and Saudi Arabia are also gaining momentum. Also, the company has completed the conversion of Pizza Sprint stores to Domino's stores in South Africa and Germany. This should further drive revenues.

Promising Value to Shareholders

Regular share buybacks underscores Domino's Pizza’ commitment toward creating shareholder value and its potential to enhance earnings and cash flow generation capabilities. Further, it reveals the company’s confidence in its long-term strategies that promise value through quality products and programs.

Zacks Rank and Stocks to Consider

Domino's Pizza has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Famous Dave's of America, Inc. (NASDAQ:DAVE) , Arcos Dorados Holdings Inc. (NYSE:ARCO) and Good Times Restaurants, Inc. (NASDAQ:GTIM) .

While Famous Dave's of America sports a Zacks Rank #1 (Strong Buy), Arcos Dorados and Good Times Restaurants carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

One estimate for the current year moved north over the past 60 days versus no southward revisions in case of all three companies.

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